Constellation Software Inc. Announces Results for the First Quarter Ended March 31, 2014 and Declares Quarterly Dividend

TORONTO, ONTARIO--(Marketwired - April 30, 2014) - Constellation Software Inc. (TSX:CSU) ("Constellation" or the "Company") today announced its financial results for the first quarter ended March 31, 2014 and declared a $1.00 per share dividend payable on July 3, 2014 to all common shareholders of record at close of business on June 17, 2014. This dividend has been designated as an eligible dividend for the purposes of the Income Tax Act (Canada). Please note that all dollar amounts referred to in this press release are in U.S. Dollars unless otherwise stated.

The following press release should be read in conjunction with the Company's Unaudited Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2014 and the accompanying notes, and with our annual Consolidated Financial Statements, prepared in accordance with International Financial Reporting Standards ("IFRS") and our annual Management's Discussion and Analysis for the year ended December 31, 2013, which can be found on SEDAR at www.sedar.com and on the Company's website www.csisoftware.com. Additional information about the Company is also available on SEDAR at www.sedar.com.

Q1 2014 Highlights:

• Revenue grew 54% to $395 million compared to $256 million in Q1 2013. Organic growth was 7% in Q1 2014.
  
  
• Adjusted EBITA increased $22 million or 56% to $63 million as compared to $40 million in Q1 2013.
  
  
• Adjusted Net Income increased 60% to $53 million ($2.52 on a diluted per share basis) from $33 million ($1.57 on a diluted per share basis) in Q1 2013.
  
  
• Net income was $9 million in Q1 2014 and Q1 2013. ($0.42 on a diluted per share basis in Q1 2014 compared to $0.43 in Q1 2013).
  
  
• Six acquisitions were completed for aggregate upfront cash consideration of $15 million (which includes $4 million paid for acquired cash). Deferred payments associated with these acquisitions have an estimated value of $3 million.
  
  
• Cash flows from operations increased $66 million or 194% to $100 million from $34 million in Q1 2013.
  
  
• The amount drawn on the Company's credit facility increased to $485 million from $479 million in Q4 2013.
  
  

First quarter 2014 revenue was $395 million, an increase of 54%, or $138 million, compared to $256 million for the comparable period in 2013. The increase is mainly attributable to growth from acquisitions, however, the Company did experience organic growth of 7%.

Adjusted EBITA for the first quarter 2014 was $63 million, a 56% increase compared to the prior year's first quarter Adjusted EBITA of $40 million. First quarter 2014 Adjusted EBITA per share on a diluted basis increased 56% to $2.96, compared to $1.91 for the same period last year. Adjusted EBITA margin was 16% for both the quarters ended March 31, 2014 and March 31, 2013. A general improvement in EBITA margins across business units (18%) was offset by low EBITA margins realized by Total Specific Solutions (TSS) B.V. ("TSS") (5%). The TSS EBITA margins included severance of approximately $3 million relating to a restructuring program in place at the time of the acquisition.

Adjusted Net Income for the first quarter 2014 was $53 million, compared to the prior year's first quarter Adjusted Net Income of $33 million, a 60% increase. First quarter 2014 Adjusted Net Income per share on a diluted basis increased 60% to $2.52 compared to $1.57 for the prior year's first quarter.

Net income for the first quarter 2014 and 2013 was $9 million. Net income per share on a diluted per share basis for the first quarter of 2014 decreased 3% to $0.42, compared to $0.43 for the first quarter of 2013.

The following table displays our revenue by reportable segment and the percentage change for the three months ended March 31, 2014 compared to the same period in 2013:

		Three months ended March 31,				Period-Over-Period Change
		2014		2013		$		%
		($M, except percentages)
Public Sector
Licenses		16.2		12.7		3.5		27%
Professional services		75.2		42.2		33.0		78%
Hardware and other		28.6		22.1		6.5		30%
Maintenance and other recurring		157.8		93.9		63.9		68%
		277.8		170.9		106.9		63%
Private Sector
Licenses		10.3		7.9		2.4		30%
Professional services		16.6		12.9		3.7		29%
Hardware and other		5.2		3.7		1.5		39%
Maintenance and other recurring		84.9		61.0		24.0		39%
		117.1		85.6		31.5		37%
Comparative figures have been reclassified to conform to current year's presentation.

Public Sector

For the quarter ended March 31, 2014, total revenue in the public sector reportable segment increased 63%, or $107 million, to $278 million, compared to $171 million for the quarter ended March 31, 2013. Revenue growth from acquired businesses was significant as we completed twenty-three acquisitions since the beginning of 2013 in our public sector segment. It is estimated that acquisitions completed since the beginning of 2013 contributed approximately $94 million to our Q1 2014 revenues. Organic revenue growth was 7% in Q1 2014 compared to the same period in 2013.

Private Sector

For the quarter ended March 31, 2014, total revenue in the private sector reportable segment increased 37%, or $31 million, to $117 million, compared to $86 million for the quarter ended March 31, 2013. Revenue growth from acquired businesses was significant for the three month period as we completed thirteen acquisitions since the beginning of 2013 in our private sector segment. It is estimated that acquisitions completed since the beginning of 2013 contributed approximately $26 million to our Q1 2014 revenues. Revenues increased organically by 7% in Q1 2014 compared to the same period in 2013. 

Conference Call and Webcast

Management will host a conference call at 9:00 a.m. (ET) on Thursday, May 1^st, 2014 to answer questions regarding the results. The teleconference numbers are 416-340-2216 or 866-226-1792. The call will also be webcast live and archived on Constellation's website at www.csisoftware.com. 

A replay of the conference call will be available as of 11:30 a.m. ET the same day until 11:59 p.m. ET on May 14, 2014. To access the replay, please dial 905-694-9451 or 800-408-3053 followed by the passcode 9393313.

Forward Looking Statements

Certain statements herein may be "forward looking" statements that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Constellation or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the results discussed in the forward looking statements. These forward looking statements reflect current assumptions and expectations regarding future events and operating performance and are made as of the date hereof and Constellation assumes no obligation, except as required by law, to update any forward looking statements to reflect new events or circumstances. 

Non-IFRS Measures

The term "Adjusted EBITA" refers to net income before adjusting for finance and other income, finance costs, income taxes, share in net income or loss of equity investees, impairment of non-financial assets, amortization, and foreign exchange gain or loss. The Company believes that Adjusted EBITA is useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration intangible asset amortization and the other items listed above. "Adjusted EBITA margin" refers to the percentage that Adjusted EBITA for any period represents as a portion of total revenue for that period. Previously the Company has reported "Adjusted EBITDA" in certain financial disclosures. Adjusted EBITDA refers to Adjusted EBITA as defined above then further excludes depreciation. The Company uses depreciation as a proxy for the cash flows used to purchase property and equipment required to support the Company's main business activities. As such, the Company believes Adjusted EBITA is a more useful measure then Adjusted EBITDA.

"Adjusted net income" means net income adjusted for non-cash expenses (income) such as amortization of intangible assets, deferred income taxes, and certain other expenses (income). The Company believes that Adjusted net income is useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration amortization of intangible assets, deferred income taxes, and certain other non-cash expenses (income) incurred or recognized by the Company from time to time. "Adjusted net income margin" refers to the percentage that Adjusted net income for any period represents as a portion of total revenue for that period.

Adjusted EBITA and Adjusted net income are not recognized measures under IFRS and, accordingly, readers are cautioned that Adjusted EBITA and Adjusted net income should not be construed as alternatives to net income determined in accordance with IFRS. The Company's method of calculating Adjusted EBITA and Adjusted net income may differ from other issuers and, accordingly, Adjusted EBITA and Adjusted net income may not be comparable to similar measures presented by other issuers.

The following table reconciles Adjusted EBITA to net income:  

		Three months ended March 31,
		2014		2013
		($M, except percentages)
Total revenue		394.8		256.4
Net income (loss)		8.9		9.2
Adjusted for:
Income tax expense (recovery)		8.2		2.7
Foreign exchange (gain) loss		0.2		1.8
Equity in net (income) loss of equity investees		(0.1)		(0.3)
Finance income		(0.5)		(0.5)
Finance costs		3.3		1.1
Amortization of intangible assets		42.8		26.5
Adjusted EBITA		62.8		40.4
Adjusted EBITA margin		16%		16%

The following table reconciles Adjusted net income to net income:

		Three months ended March 31,
		2014		2013
		($M, except percentages)
Total revenue		394.8		256.4
Net income (loss)		8.9		9.2
Adjusted for:
Amortization of intangible assets		42.8		26.5
Deferred income tax expense (recovery)		1.6		(2.3)
Adjusted net income (loss)		53.3		33.3
Adjusted net income margin		14%		13%

About Constellation Software Inc.

Constellation Software acquires, manages and builds vertical market software businesses that provide mission-critical software solutions.

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Financial Position
(In thousands of U.S. dollars)
(Unaudited)
			March 31,  2014		December 31, 2013
Assets
Current assets:
	Cash		$ 142,444		$ 77,967
	Equity security available-for-sale		469		780
	Accounts receivable		203,949		191,446
	Work in progress		61,913		53,682
	Inventories		23,704		21,145
	Other assets		69,691		67,161
			502,170		412,181
Non-current assets:
	Property and equipment		36,378		36,017
	Deferred income taxes		61,849		71,673
	Other assets		35,317		36,171
	Intangible assets		954,862		981,662
			1,088,406		1,125,523
Total assets			$ 1,590,576		$ 1,537,704
Liabilities and Shareholders' Equity
Current liabilities:
	Bank indebtedness		$ 483,773		$ 477,170
	Accounts payable and accrued liabilities		219,836		260,585
	Dividends payable		21,233		21,031
	Deferred revenue		413,431		306,213
	Provisions		13,693		11,887
	Acquisition holdback payments		23,531		26,496
	Income taxes payable		7,074		5,474
			1,182,571		1,108,856
Non-current liabilities:
	Deferred income taxes		106,746		112,780
	Acquisition holdback payments		4,255		4,203
	Other liabilities		43,129		45,866
			154,130		162,849
Total liabilities			1,336,701		1,271,705
Shareholders' equity:
	Capital stock		99,283		99,283
	Accumulated other comprehensive income		621		449
	Retained earnings		153,971		166,267
			253,875		265,999
Total liabilities and shareholders' equity			$ 1,590,576		$ 1,537,704

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Income
(In thousands of U.S. dollars, except per share amounts)
Three months ended March 31, 2014 and 2013
(Unaudited)
			2014		2013
Revenue			$ 394,849		$ 256,431
Expenses
	Staff		225,672		148,104
	Hardware		18,739		16,011
	Third party license, maintenance and professional services		35,319		18,440
	Occupancy		9,958		6,580
	Travel		11,415		9,506
	Telecommunications		3,945		3,093
	Supplies		8,707		4,648
	Professional fees		5,039		3,461
	Other, net		9,141		3,990
	Depreciation		4,087		2,212
	Amortization of intangible assets		42,802		26,461
			374,824		242,506
Foreign exchange loss (gain)			172		1,775
Share in net (income) loss of equity investee			(120)		(344)
Finance and other income			(468)		(490)
Finance costs			3,314		1,116
			2,898		2,057
Income before income taxes			17,127		11,868
Current income tax expense (recovery)			6,611		4,980
Deferred income tax expense (recovery)			1,620		(2,311)
Income tax expense (recovery)			8,231		2,669
Net income			8,896		9,199
Earnings per share
	Basic and diluted		$ 0.42		$ 0.43

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Comprehensive Income
(In thousands of U.S. dollars, except per share amounts)
Three months ended March 31, 2014 and 2013
(Unaudited)
			2014		2013
Net income			$ 8,896		9,199
Items that are or may be reclassified subsequently to net income:
	Net change in fair value of available-for-sale financial asset during the period		93		111
	Amounts reclassified to profit during the period related to realized gains on available-for-sale financial asset		(264)		-
	Foreign currency translation differences from foreign operations		320		(2,611)
	Current income tax recovery (expense)		35		(52)
	Deferred income tax recovery (expense)		(12)		-
Other comprehensive (loss) income for the period, net of income tax			172		(2,552)
Total comprehensive income for the period			$ 9,068		$ 6,647

CONSTELLATION SOFTWARE INC.

Condensed Consolidated Interim Statements of Changes in Equity

(In thousands of U.S. dollars)

(Unaudited)

Three months ended March 31, 2014

		Capital stock		Accumulated other comprehensive income/(loss)				Total accumulated other comprehensive income/(loss)		Retained earnings		Total
				Cumulative translation account		Amounts related to gains/losses on available- for-sale financial assets
Balance at January 1, 2014		$ 99,283		$ (32)		$ 481		$ 449		$ 166,267		$ 265,999
Total comprehensive income for the period
Net income		-		-		-		-		8,896		8,896
Other comprehensive income (loss)
Net change in fair value of available-for-sale financial asset during the period		-		-		93		93		-		93
Amounts reclassified to profit during the period related to realized gains on available-for-sale financial assets		-		-		(264)		(264)		-		(264)
Foreign currency translation differences from foreign operations		-		320		-		320		-		320
Current tax recovery (expense)		-		35		-		35		-		35
Deferred tax recovery (expense)		-		(12)		-		(12)		-		(12)
Total other comprehensive income (loss) for the period		-		343		(171)		172		-		172
Total comprehensive income (loss) for the period		-		343		(171)		172		8,896		9,068
Transactions with owners, recorded directly in equity
Dividends to shareholders of the Company		-		-		-		-		(21,192)		(21,192)
Balance at March 31, 2014		$ 99,283		$ 311		$ 310		$ 621		$ 153,971		$ 253,875

CONSTELLATION SOFTWARE INC.

Condensed Consolidated Interim Statements of Changes in Equity

(In thousands of U.S. dollars)

(Unaudited)

Three months ended March 31, 2013

		Capital stock		Accumulated  other comprehensive income/(loss)				Total accumulated other comprehensive income/(loss)		Retained earnings		Total
				Cumulative translation account		Amounts related to gains/losses on available- for-sale financial assets
Balance at January 1, 2013		$ 99,283		$ 1,450		$ 171		$ 1,621		$ 157,900		$ 258,804
Total comprehensive income for the period
Net income		-		-		-		-		9,199		9,199
Other comprehensive income (loss)
Net change in fair value of available-for-sale financial assets during the period		-		-		111		111		-		111
Amounts reclassified to profit during the period related to realized gains on available-for sale financial assets		-		-		-		-		-		-
Foreign currency translation differences from foreign operations		-		(2,611)		-		(2,611)		-		(2,611)
Current tax recovery (expense)		-		(52)		-		(52)		-		(52)
Deferred tax recovery (expense)		-		-				-		-		-
Total other comprehensive income for the period		-		(2,663)		111		(2,552)		-		(2,552)
Total comprehensive income for the period		-		(2,663)		111		(2,552)		9,199		6,647
Transactions with owners, recorded directly in equity
Dividends to shareholders of the Company		-		-		-		-		(21,192)		(21,192)
Balance at March 31, 2013		$ 99,283		$ (1,213)		$ 282		$ (931)		$ 145,907		$ 244,259

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Cash Flows
(In thousands of U.S. dollars)
Three months ended March 31, 2014 and 2013
(Unaudited)
				2014		2013
Cash flows from operating activities:
	Net income			$ 8,896		$ 9,199
	Adjustments for:
		Depreciation		4,087		2,212
		Amortization of intangible assets		42,802		26,461
		Share in net (income) loss of equity investee		(120)		(344)
		Finance and other income		(468)		(490)
		Finance costs		3,314		1,116
		Income tax expense		8,231		2,669
		Foreign exchange loss (gain)		172		1,775
	Change in non-cash operating working capital exclusive of effects of business combinations			37,896		(4,124)
	Income taxes paid			(5,285)		(4,562)
	Net cash flows from operating activities			99,525		33,912
Cash flows from (used in) financing activities:
	Interest paid			(2,215)		(505)
	Increase (decrease) in other non current liabilities			-		(23)
	Increase (decrease) in bank indebtedness, net			6,601		63,000
	Dividends paid			(21,192)		(21,192)
	Net cash flows from (used in) in financing activities			(16,806)		41,280
Cash flows from (used in) investing activities:
	Acquisition of businesses, net of cash acquired			(10,834)		(69,893)
	Post-acquisition settlement payments, net of receipts			(2,344)		(5,221)
	Proceeds from sale of available-for-sale equity securities			404		-
	Interest and dividends received			130		-
	Proceeds from sale of assets			-		5,423
	Property and equipment purchased			(4,218)		(2,111)
	Net cash flows used in investing activities			(16,862)		(71,802)
Effect of foreign currency on cash and cash equivalents				(1,380)		(390)
Increase (decrease) in cash and cash equivalents				64,477		3,000
Cash, beginning of period				77,967		41,313
Cash, end of period				$ 142,444		$ 44,313